Rights upon Delivery or When? Holly Emrick Svetz i
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1 Rights upon Delivery or When? Holly Emrick Svetz i For years, contractors have given government employees assess to technical data that is not a deliverable under the contract -- in slides at design review, in handwritten notes and drawings shared during technical interchange meetings, and many other informal settings. In many cases, these informal exchanges of technical data have been regularized in electronic portals, which allow contractor and government employees to share up-to-date drafts and preliminary information to increase the level of collaborations and flow of information. Because all members of a contractor team, from the prime contractor to the lowest level supplier, may be contributing information directly to these electronic portals, it is very important that prime contractors understand their subcontractors' positions on rights in their data and that these positions are made clear in the price contract and flowed down into subcontracts. This article discusses the treatment of that informal exchange of information under the technical data rights scheme in place and recommends steps for contractors and buying agencies to clarify their intentions contractually. The regulations regarding rights in technical data are complex and intimidating and create confusion about when the Government assumes any rights it may receive under the procurement regulations. The international trade community developed INCOTERMS ii to clearly define when liability, title, and possession of shipped goods transfer. Since the informal transfer of technical data is not expressly covered by the laws and regulations, we look to those sources to determine if they may help in their interpretation. The statutes governing technical data in government contracts require that regulations contain appropriate provisions relating to technical data, including provisions (1) Defining the respective rights of the United States and the contractor or subcontractor (at any tier) regarding any technical data to be delivered under the contract; iii The statutes go on to describe treatment of technical data that is "delivered" or "to be delivered" or its "delivery" over ten times. iv The policy section of the Department of Defense Federal Acquisition Regulation Supplement ("DFARS") incorporates the language of the statute and its focus is on technical data that is to be delivered. v In addition, the data rights assertion tables offerors are to submit with proposals instruct offerors: Identification and assertion requirements in this provision apply only to technical data, including computer software documents, or computer software to be delivered with other than unlimited rights. vi 1
2 Having said that, the technical data rights statutes and regulations also say that the Government receives unlimited rights in technical data developed exclusively with Government funds that was (i) required as an element of performance under the contract or (ii) developed under the contract. vii So the issue appears to be that while the Government may have rights in technical data that is not delivered, these rights are inchoate rights that are difficult to enforce. Recently, the Department of Defense ("DoD") and the National Reconnaissance Office ("NRO") have put in writing guidance to it procurement professionals that addresses the practical aspects of the Government's rights in technical data that is not a contract deliverable. The DoD has released its Open Systems Architecture Contract Guidebook ("OSA Guidebook"). It contains advice regarding treatment of deliverables for purposes of data rights: Establish separate Contract Line Item Numbers (CLINs) for technical data/computer software to be delivered under a contract as required by DFARS (b)(3). Solicitations and contracts should also include priced contract option CLINs for future delivery of technical data and computer software that were not acquired upon initial contract award. Although the Deferred Ordering clause at DFARS should be included in contracts, the Government should not overestimate the scope of that clause, e.g., it does not cover technical data or computer software that were not generated under the contract. Priced contract option CLINs should also be included for technical data rights licenses or computer software licenses when the Government desires additional rights in technical data/computer software. Consult with the cognizant attorney for preparation of CLINs and option CLINs. viii Can a contractor conclude that the Government is not intended to obtain any rights in technical data that is not a deliverable either under the terms of the contract or the Deferred Ordering clause? Contractors continually receive requests to treat technical data provided informally as a deliverable for purposes of the Government's data rights. The OSA Guidebook specifically addresses the use of the Integrated Digital Environment ("IDE") ix and recommends that the IDE structure, format, processes, and procedures themselves be included in the Program Management Plan. x The OSA Guidebook provides conflicting information, however, regarding delivery. In one place, the OSA Guidebook states that the Government would consider all technical data and computer software to which it is provided access before delivery as delivered for purposes of the Government's data rights, but does not consider them accepted for payment purposes. xi Elsewhere, the Program Manager is cautioned: While the Government will have access to and the ability to download work products contained in the integrated digital (or development) environment, the government cannot effectively exercise its data rights unless these items are formally required to be delivered and accepted by the Government. Access to the environment does not in any way affect or replace data delivery requirements and data rights determinations. xii 2
3 Some government agencies have established internal policies regarding "access" to technical data and computer software which is critical to program management and oversight, but access is to be provided before delivery is scheduled or the technical data and computer software is not otherwise subject to delivery ("Interim Data"). A general summary of such a policy follows. Where contractor information is placed in Integrated Data Environments, the agency is entitled to: Use, duplicate, and/or disclose technical data or computer software within the Government in connection with performing the contract (e.g., contract administration, evaluation, problem resolution, and technical collaboration with the contractor). Disclose technical data or computer software with support contractors (for aforementioned purposes) if: They are identified in Development contracts containing the appropriate clause; and Support contracts contain the appropriate clauses that reference nondisclosure agreements between the support contractors and third parties. These policies anticipate supporting additional non-disclosure agreements on an exception basis, such as when requested by the contractor which developed the Interim Data and the third party recipient is a direct competitor or when support contractors require access to extremely sensitive business data. The contracting officer must be notified of the non-disclosure agreement prior to its execution so the Government can determine that it will not delay or inhibit performance of the contract. These agency policies also contain specific restrictions and the Government cannot: Use, or allow others to use, technical data or computer software for: Exceptions: Manufacturing; Reprocurement; Other competitive purposes against contractor s interest; or Any other purpose not directly related to the contract. Technical data or computer software independently developed by or for the Government by persons not having access to the technical data or computer software at issue (evidenced by written documentation); 3
4 Government otherwise lawfully acquired rights; or Technical data or computer software is publically available. The prime contractor is required to flow down the Interim License without change to its subcontractors and imposes the same requirement on subcontractors with respect to lower-tier subcontractors and suppliers. The Government's rights terminate upon contractual delivery, contract termination, or the end of the contract period of performance, which ever is earliest and the Interim Data must be destroyed by the Government within six months of its termination of rights. The parties should determine whether to use markings that are standard government, commercial, or unique on the data. These agency policies hold that Interim Data is provided by the contractor "as is" and is not subject to release under the Freedom of Information Act, since it is not a Government record. What to Do? The prime contract and subcontracts should contain a clear list of deliverables. Often, deliverables are identified in scattered locations in a contract: In various parts of the Statement of Work (most commonly placed there by the technical team) o a deliverable listing o a project management resources and scheduling chart; and o within the body of the text In the contract Schedule, and The Contract Data Requirements List ("CDRL"). A best practice is to have the entire listing of deliverables consolidated in one of the locations, even if they are also discussed in other locations. If a clause that permits the government to order technical data after contract award is included, xiii the contractor and the buying agency should early on discuss how to track technical data that is produced but not a deliverable at the time of award. xiv Prime contractors should request their subcontractors to identify issues with use of their technical data in the proposal and request follow-on reviews on a regular basis. Buying agencies should include in their solicitations, and the offerors should include in their proposals, a mechanism for addressing the rights the Government may obtain in technical data and computer software that is not a deliverable at the time of contract award. The existing policies of procuring agencies can be used as a guide, but both parties should strive for clarity. 4
5 i Holly Svetz is a partner in the Tysons Corner, Virginia office of Womble Carlyle Sandridge & Rice LLP and practices in all areas of government contracts law with a particular interest in research and intellectual property issues. ii Published by the International Chamber of Commerce and available at iii 10 U.S.C. 2320(b)(1) & 41 U.S.C. 2302(e)(1) (emphasis added). iv Id. Curiously, the FAR regulations and their manner of implementation focus less on deliverables and more on technical data developed under a contract than the DFARS regulations. v DFARS , vi DFARS (b). vii 41 U.S.C. 2302(c)(1)(A)(i); 10 U.S.C. 2320(a)(2)(A). viii DoD Open Systems Architecture Contract Guidebook for Program Managers v.1.0, September 2012 at xvi. The author understands that a new version may be released this year, but that substantial changes have not been made to the sections discussed herein. ix IDE has been referred to as the Integrated Digital Environment when referring to program management portals, but the Integrated Data Environment is also referenced. This is meant to include informal access by the Government to technical data and computer software outside of the digital environment, such as handing out copies of briefing slides. x Id. at 13. xi Id. xii Id. at 2. xiii FAR Additional Data Requirements; DFARS Deferred Delivery of Technical Data or Computer Software; DFARS Deferred Ordering of Technical Data or Computer Software. xiv DoD contracts can include a CDRL that calls for the contractor to generate a Data Accession List ("DAL"). Described in Data Item Description DI-MGMT-81453A, a DAL "is to provide a medium for identifying contractor internal data which has been generated by the contractor in compliance with the work effort described in the Statement of Work (SOW). The DAL is an index of the generated data that is made available upon request." Even with the DAL CDRL in a contract, however, it is a best practice for the parties to reach an understanding about which internal data should be indexed out of a potentially huge volume of s, notes, drawings, computer software output, etc. being generated throughout the life of a contract. This document is intended as an informational reminder and does not constitute legal advice. If you have any questions or would like to discuss a particular situation, please contact Womble Carlyle Sandridge & Rice, LLP. The purpose of this article is to provide general information about significant legal developments and should not be construed as legal advice on any specific facts and circumstances. 5
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